Surveillance Special: Telecom in 2019

told me to buy Apple years ago. I didn't. I'm not allowed to buy anything. But anyways, the two of them together are very powerful. Paul, let's dump jump into the conversation. We gotta go really with the topic of the moment, which is his five G thing in Whahwei. Yeah, there's just a tremendous amount going on here as we think about on the telecom space globally, Walter, let's start with that. You know, we think about the Huahwei news. It's in them, it's right in the top topic right

here in the news this week. But it really ties into the biggest deal in your space, or one of the biggest deals in your space, Sprint t Mobile. What's the latest there, and how's it all tight in it? Really does? I mean, there's there's a tremendous focus on this race to five G and and beating China and being the first to have our country our companies excel there, and you know, pushing back on Huawei is part of that.

It's also part of the trade war. But I think it's you know, I think was as has been mentioned over the past twenty four hours, but you know, Sprint TEA Mobile, is it transaction that is getting pitched in part on you know, even if it raises prices, does T Mobile get enough spectrum to accelerate five G? And Again, if this is a political agenda um for the administration, that could be something that that supersedes how the d o J typically looks at transactions, which should be really

on whether it raises prices for customers or not. So, I mean, when we think about the five this race to five G on a global basis, in your perspective, is it really the US versus China? I mean, I think it's that's the primary focus. Right. You've got a number of vendors there, their ability to move fast on deploying UM technologies in their country. UM, So that that's definitely been the focus on the administration. UM. You know, being first is clearly important UM and starts to develop,

you know, who can have leading market shairs. But look, at the end of the day, we're effectively shutting down Huawei. That's going to provide an opportunity for other companies to to excel on the at least on the infrastructure side. I mean, rich, I was the last one to get an iPhone. I was the last one to get the iPod thing before it as well. Is your content world going to catch up with Walter's five G world? I mean is it? Are we going to consume in five

years with five G like we consume now? Well, look, I think the one of the big questions we have right is you know what you're seeing is TV is shifting to the Internet. You know, it used to be. I think we were often looked at as a heretic talking about our good Luck bundle hashtag four five years ago. No one's calling us a heretic anymore. I mean now it's just a question of how fast is the traditional linear TV world melting down? Cord cuttings at record levels.

You're seeing essentially every major media company kind of if you look at the legacy media companies, they just went through their big TV advertising upfront where they show up all their new shows for the coming year, and they actually spent more time only the beginning of every single presentation, Tom was talking about their streaming plans, Warner Media starting one, NBC starting one, Disney's talking about owning a percent of Hulu.

Now at the beginning of their presentation, I mean, it was all about the Internet, and so once you shift TV to the Internet, five G flows perfectly. And in fact, I think one of the most interesting things that no one's talking about right now is what Verizon is planning on doing. What So Verizon signed a deal when they reported earnings, they came out with the press release that they are expanding their partnership with YouTube TV. So you take a best in class over the top cable service

and you combine it with Verizon. Now they're not just packaging with five G. They're planning on selling it. Instead of selling FiOS TV, they want to sell YouTube TV and they haven't started the marketing for that. But you know, you asked the question of how they're going to take advantage of what five G can do. And I think that's a great example of you know, the actual quality of the experience of combining what YouTube and Google have done with YouTube TV with these better networks is really

interesting to us. So one of the things as I think about having YouTube guys in the studio together, I think about the A. T and T Time Warner deal. But you know, Tom, these are the big A T. T. One of the biggest names in Walter Space and Time Warner. You know, the Legacy Media, a company that Richard and

I've covered for a long time. Putting those two companies together, Walter, from your perspective, was that a good deal for A T and T. Part of it for A T and T is that could becoming this massive conglomerate and its diversification, and they're figuring out ways to to continue to fund dividend grow, which is what their investors care about the most.

So if they can create a five G studio like I guess for eisen has and and figure out ways to mix the technology with the content, I guess they're synergy. Come on, T and T has done eight point one percent per year for the last ten years. Rich Greenfield, that's a failure right, I mean, is a T and D ready for a moonshot? I don't think so. Look, I call it the many ways. I look at the whole space and call this the March of the Penguins. You probably remember the beginning of the movie Tom where

all of the penguins are huddling the Emperor Penguins. It's freezing cold, winter's coming and they huddled together for survival. None of the media companies are doing anything interesting. I mean A T and T buying Time, Warner, Discovery merging with Scripts, Disney buying Fox Via commerging with CBS. These are the most unexciting transformative transactions. We got a minute

here and then we're gonna come back. And as I get things to talk about Walter Pi, if the creative people walk out the door, these companies change, don't they do. There's this existing amount of library, and there's these Look, the direct TV customers are fleeing every quarter, but there is some residual free cash flow that helps them to fund the dividend. But yeah, I mean, look, it's important. Rich would know far more about that than I do. Um Game of Thrones is over. You know what happens

with HBO what happens with HBO. Look, but look, you know, Tom, I would say that you know, at the end of the day, UM content is about spending money, right, I mean, you've got to spend a lot of money. You've got to really invest in it. I think it's way too early to tell how much A T and T is going to invest in businesses like HBO. We haven't even seen their new kind of Warner Media whether they're gondn't

call it HBO Max. But we haven't even seen this yet, so it's still pretty early than Yes, there's been a lot of change. People are definitely nervous, both internally and externally, but we'll see what they actually put up on the screen. This is a joy. Rich Greenfield Walter with us will continue this discussion Falsephenian time can thrilled on media jab where us Walter pri secon Yes, we'll get to Apple had a couple of emails. We will get to Apple

with Mr Pick as we can. He dragged along our green Field where this is Rich give us a story quickly of the vantage I p o. I want to go back, Tom, that's too far ago. I can't even you know, I'm too old. My memory doesn't go back really important about the courage of securities analysts and that you have an opinion and the company gets angry, what do you do? Look, I mean, you know, take a great example of Disney. I mean, they didn't like our celerating for three years. Um, you know, the stock ons

are performed. I mean the only real movement in the stock has been in the last sort of eight weeks where it had a big bump, but it was basically flat for three years straight, flat to down. Where are you buy old Cell and Disney right now? Now Now we're at neutral and we're just waiting. I think, you know, the good news for dis Me is they've set really ambitious goals. The bad news is, uh, the cable ecosystem

is coming unhinged, chord creditings accelerating. But look, the the issue answer your question, very bluntly, is they don't let us into analyst meetings, they don't let us call them, they don't respond to emails. It's disappointing behavior from a big public company. But the reality is we don't need them to do our job, and we're gonna unfortunately, Tom, I mean, it's it happens more than you would think. But what you and I should have done aboutour or

five years ago. Tom has just listened to this guy Rich and just gone basically, I'm gonna paraphrase here, long Netflix and just short the rest of media. And that's kind of where Rich has been, and it's kind of where the stocks have traded. But so Rich specifically on Disney here, you know the way I kind of look at it. If anybody can compete against the Netflix or the Amazons or maybe even the Apples and the facebooks,

it's gotta be Disney. I'm not sure if they can do it, But do you think they have what it takes to make this pivot to where the world is going? Look, they absolutely have the content to do it and the creative resources to do it. The question is is do they really want to quote unquote win and And by meaning by that, I mean they have to spend aggressively. You know, you can't just go in and and dabble in streaming. You have to literally put all of your

focus on making this work. And the challenges is you know, Avengers is amazing, right, I Mean, Walt loved Endgame. He sat through the whole three hours with his family. He's a super Marvel fan. I mean, there's no doubt about it. So did you know they sold two billion dollars worth of tickets worldwide? So figure let's just say ten dollars a ticket. Two hundred million people bought tickets, and Disney

knows the names of literally none of them. They don't know that Walt and his family love Marvel and Avengers. So part of the problem is Disney still sticking with movie theaters, home video DVD iTunes. They're not shifting to a model where if you want to watch Avengers, the only place to watch it is on Disney. Plus, that's just too disruptive for them, And so I think the question is how aggressive is Disney in shifting their business model to make the streaming service a winner? Because they

can win. It's a matter of how disruptive, you know, disrupting yourself. You go back to Apple and Steve Jobs, and disrupting yourself is really hard culturally to do, and media companies generally management teams are not incentivized to blow up their legacy business models to build for the future. And I think that that is a real inhibitor of winning in streaming. So so Walter, let's let's pivot to Apple here, because, as Richards is saying, it's hard to

change your core business model. For Apple, it's been that, let's the unit sales of iPhones has kind of been the story for to the last decade or so. You can throw on iPads if you want, you can throw in some other things, some wearables, but it's really been the phone. Uh can that company? Can Apple make the pivot to what is the next thing? And I'm not

even sure I know what the next thing is? Yeah, I mean the next thing for them is the focused on services and it's and services is not something that's necessarily disrupting what they're doing. I mean, look, they've had a speed bump in the past year, given the volatility that exists in China and sales in China and the fact that people are just holding onto their phones for a long period of time. There's a lot of people out there, Tom, I don't know what what do you got?

An iPhone six success? And there's a lot of people that have very old iPhones that they haven't upgraded for all he's checking right now, He's not even sure, yes, exactly. So the upgrade cycle is at some point can stop lengthening, and so your your iPhone business is still generating tens of billions of dollars of free cash flow, and they're sitting on a ton of cash. And this is stuff that they can use to build a content business, not necessarily go out and buy a library and legacy product.

I mean, Riches talked at length about what Netflix has done over the past ten years and the amount of money they can spend. Apple's got nine million active users of its iPhones. If it can start bringing them content and sign them up to a subscription based service, that's where they're going, and that's not something that's disrupting their existing business. What level of cheap is Apple right now? It's how to pull back the Apple gloom cruise out in full force China. We're all gonna die on the

Walter pisk range. How cheap is cheap now? For it's kind of cheap. It's not super cheap like it was five months ago when it was discount to the market. I think we're like to turn discount to the market has come back largely on these trade warfares, so you're

not getting a massive bargain on it right now. And there's frankly risk what they are a huge target in this trade war, what we've done as a country to Huawei, and now what you're seeing in China as far as the negative sentiment towards the US have an impact on other numbers. Just because the time, Richard, What's what's your one idea right now? Give us a stock idea today where Sweeney can go large this summer. The single best idea for your listeners right now that I would go

all in on it is Snapchat. You know, we think Snapchat is making the turn. It is a hated company by Wall Street, very much like Twitter was two years ago. Nobody wants to talk about it in investor meetings. It's been left for dead. The stocks bounced off the bottom. It's still well below it's sixteen dollar I p O two plus years ago, but it is getting better. They are shifting into more of a platform versus a walled garden.

People are not focused on that transition and the fact that the product is getting better, and so I look at a stock that can move meaningfully over the course of the next six to nine months. Snapchat is the single best idea I have on alongside. Before we let you go, guys, just real quick, Viacom, CBS soon soon soon. But on the other hand, it's a broken record. We've been saying soon for three years, but a lot of people had to get fired first. And Tom, that's the

next drome. If you're looking for what's going to replace Game of Thrones, it's gonna be what happens with Sherry Redstone And yes, some there we're still alive. And the two companies of CBS and Viacom, And then the time to both of you and both the answer within your capabilities what happens to sports on media? I mean, does Amazon start bidding against the networks were all familiar with. I mean Amazon's already starting, right, I mean Thursday Night

football you can simulcast on Amazon. They've done things like US Open Tennis overseas. But in five years, are they're

going to be dominant? Or you know? It's funny. Jimmy Pittaro, who runs ESPN, was interviewed the other day by your competitor over at the Wall Street Journal, and he was asked a similar question of like, could you imagine in five years you wake up and Amazon, Google and Facebook all owned major sports rights, And he basically said, I can't envision that, Like, I just don't think it's gonna happen.

And look, it may not be all three, but I would be shocked, Tom, literally shocked if one of the major tech platforms didn't buy some major sports rights over the next couple of years and Sunday tickets up right now. Amazon could buy Sunday ticket right this year. This has been wonderful. Thank you so much, both of you coming in. Walter Price second, Rich Greenfield's great, and particularly great because their entourage is so large that we got him into

the Claim Daytrium here at our world headquarters. They are with bt I G. Again, don't ask us for their literature. We protect the copyright of all of our guests literature. You can get it and bt I G. Rich Greenfield, Walter Pissek Paul to get things started with Craig Moffatt,

who's won the Institutional Investor Awards so many times. I think they named it after Yeah, exactly, the cable telecom to Craig with us, and I love Craig your single phrase on a T and T searching for a unifying theory, whether we own a T and T or not we care about Ma Belle, is this does this mob bell have a future? Well, how are you, Tom? You know, I I don't know if it has a unifying theory. That's the problem. Um. The some of the businesses are

healthier than others. Um, the wireless business is getting a bit healthier. The media businesses that they've bought UM based I think an uphill challenge to compete with Disney Plus and some of the online streaming solutions. Um. But it direct TV, as we all know, it has a world of problems. But but the bigger problem with a T and T as a whole is is what is the whole? What is the unifying theory that makes this more than

just a collection of disparate businesses, most of which are struggling. So, Craig, if I think back all the way to when that deal was announced, it was, you know, just kind of sum it up. It was, Hey, we've got this big wireless network, and let's put some content out to those on this wireless network, to our customers. How concerned are you and you know investors that it seems like a lot of the talent from Time Warner walked out the door, whether it's HBO or Turner And do I really want

some telephone guys running my media business. Look that that's a big enough problem in and of itself, right, I mean, I think it was. There was a good logic for saying, at the silos that used to be Time Warner, that is, the studio running separately from the Turner networks running separately from HBO, that those were two siloed and that there was a strategic comparative to unify them somewhat so that you could make decisions across the the entire business of

Warner Media. Um, that that would would make some sense strategically. I get that. And in fact, you could also say that there's some cost savings in doing that too, and that's fine as well. I get all that. That's fine. The problem is the hippocratic oath of business, right is, first, do no harm to the patient. Um. If the talent of an organization like HBO or Turner leaves or Warners

Warner Brothers studio leaves, you're in real trouble. And and so that the challenge facing a T and T is how do you make some necessary strategic adjustments without jeopardizing the cultural integrity of the business. And the jury's out, but you have to be at least a little nervous, or more than a little nervous. That's some top talent has already left, and that a lot of resumes are out there, Craig, just because it's time, I want to go to the vision for all our listeners of how

many players there will be. It's a four apoly now in wireless. I guess we're ever in a national debate about a triopoli in wireless? Do we care? Or is it just Tea Mobile and everybody else? What is it right now? Well, look, you're right, it's it's at the network layer of wireless. It's for if the Sprint Tea Mobile deal gets approved with or without the spinoff of the Boost Wireless brand, which is what the companies have proposed to the federal to the FCC, and the FCC

has agreed that that's sufficient. The d o J hasn't decided yet. Um, it would still be going from four to three networks. And that's the real question that the Department of Justice is struggling with. Is three underlying net works, irrespective of the number of players retailing on top of it, is three underlying networks sufficient? I don't know the answer to that. I'm not sure you can make the argument that it's good for five G investment and and five

G technology to to let the third player be stronger. UM. But the counter argument that ultimately you're likely to see higher prices for consumers not an implausible one. And again that's what the d o J is struggling with. So Craig, you talk about perhaps you know an uncertain underlying you know, strategy for a T and T. Now that's ball time, Warner,

let's switch gears to Comcast. Um. You know obviously the you know, the fantastic cable company over the years, uh, you know, they bought NBCUniversal, really getting into the content business. They made a big run at Century Fox lost to Disney. I guess the you know, the they did the Consolation Prize with Sky. Are they a collection of assets or do you see an kind of an overriding theme there? I see them as two collections of assets. It's it's not quite as much of a hodgepodge as a T

and T is. But the it's not entirely clear to me, nor has it ever been, by the way, how NBC fits with the cable business. And it's not entirely clear to me how Sky, their newest asset, fits with the

cable business. It sort of fits with NBC. But so you know, the challenge for Comcast is now somewhat similar to a T and T and that you've got a cable business which a lot of people have for years said looked like a dinosaur UM that is just moving from strength to strength, and the infrastructure underlying UM there's the physical distribution of ones and zeros, whether it's it's Netflix or Hulu or somebody else's O T T video. That side of the business does really well in this

kind of new media future. But it's really unclear what happens to NBC and what happens to Sky in that new media future. And that's what investors grappling with with Comcast, which is Comcast is you think of it as a cable company, but of its revenues are now non cable and so it's kind of split down the middle in a way that at least to my mind, half of it right now looks very good, the cable side, and the other half has a lot of question marks. Do

you have a single best buy right now? I mean, given the goofiness of the market China trade all the other stuff we talk about every day. Is there a Moffatt Nathanson, O MG, this is cheap call? Well, I'll tell you on my side of the coverage. So Michael Nathanson covers media, I cover telecom and cable. On my side of the coverage, I really like where the cable industry is positioned right now, and UM, to me, that means Comcast is is half of that business is really attractive,

But a better way to play it is Charter. I'd rather own Charter and I'd rather own Altis USA. Altis is still a very cheap stock, even after having a nice run. UM, I'd rather own Altie and and Charter than anything else in my coverage right now. So so Craig just focusing on Charter. That's the you know, another big cap name as the second biggest cable operator out there. I'm not sure everybody it's not as high profile as Comcast, but you know, John Malone has a big piece of Charter.

What do you think Charter does in this consolidating media landscape. Do they feel the need to jump in in any way? Do you think, um, I think they'd like to buy more cable if they could but realistically, I'm not sure there's much there to buy. Some have suggested that they could even try to acquire all t C USA, although I find that pretty unlikely. UM. I don't know that you need a merger consolidation story, certainly not a vertical story. I don't think they have any interest in buying into

media or anything like that. I don't think you need a consolidation story for those stocks to work, or to really like the position that the cable infrastructure providers are in. After all, those are quintessentially local infrastructure. UM. You can string together a lot of localities and make it a bigger collection, but it doesn't fundamentally change the economic premise of the business just to make it a whole lot bigger.

Craig Bmfatt, thank you so much, with Moffatt Nathan sending here on a number of the things that we pay monthly bills to as well. This is real joy to have a media focus. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane. Before the podcast, you can always catch US, worldwide, I'm Bloomberg Radio